Is the worst really over for rupee?

While the RBI has been intervening heavily in both spot and forward markets to support the currency, especially when it nears its record lows, there are technical signs that the rupee is set for some near-term consolidation.

The Fibonacci Retracement, a widely used technical tool that charts and predicts patterns in currency movements, signals an eventual move for the rupee to as high as 63 levels from current 66 levels.

Meanwhile, the number of open contracts in domestic rupee futures has slumped this month, which is a sign that traders are removing their short positions in the currency.

Is the worst really over for rupee?

"The rupee is still in a precarious position but it has been sold off a lot and that means further currency weakness will be capped," Barclays strategist Hamish Pepper said.

Fundamentally, Pepper said the rupee was undervalued 21 percent against the dollar, among the biggest gaps among emerging market currencies.

In his first day as governor, Rajan unexpectedly announced several measures to support the rupee and open up markets, providing a shot of confidence for investors unnerved by the country's worst economic crisis in two decades.

Is the worst really over for rupee?

Although some traders are bracing for currency volatility ahead of the US monthly employment data due later in the day, traders have nonetheless removed some of their short positions in rupee futures contracts in the National Stock Exchange.

The so-called open interest futures positions has dropped from a peak of almost 1.2 million contracts on August 19 to 826,000 contracts as of Thursday, the day after Rajan's debut.